Daily Currency Update

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The Loonie rallies strongly following a robust bounce in crude oil and U.S. dollar funding stress easing.

CAD - Canadian Dollar

Crude oil is bouncing back due to output cuts from major producers. Russian Energy Minister Alexander Novak said that Russian companies will cut output by about 19 percent from February levels. As a consequence, the Loonie is in a rally mode against the Euro, U.S. dollar, British Pound, and Japanese Yen by 0.2, 0.46, 0.49, and 0.25 percent respectively at the time of this writing.

The Loonie is also rallying because of the ongoing risk-on mood and ahead of news from the Federal Reserve. Canada’s economic data calendar includes the release of February GDP tomorrow and April Markit PMI on Friday.

Key Movers

There are renewed hopes for a drug to fight the coronavirus, helping market participants to shrug off data showing the biggest economic growth contraction since 2008 in the first quarter. Therefore, the Greenback, given its safe haven status, has declined versus G10 currency peers, falling around 0.21 percent versus a basket of currencies including the Euro, Pound, Yen, and Canadian dollar. Furthermore, the U.S. dollar has declined ahead of the Fed’s rate decision.

The U.S. dollar is also decreasing (and the Loonie rising) following fewer financial market pressures (U.S. dollar funding stress easing) and ahead of the Fed policy decisions at 2:00 pm EST and before the ECB release in Europe tomorrow. In the U.S. later today, Fed Chairman Jerome Powell will provide a press conference at 2:30 pm EST, where he will probably point to a series of indicators showing the flow of funds through money markets improving dramatically from last month’s disruption.

The Euro climbed against the U.S. dollar ahead of the ECB decision tomorrow. France is planning to reopen shops on May 11th, adding to more signs that Europe is easing virus-driven lock-downs. So far it seems like the market is focusing on the prospect of economies re-opening and pricing in a higher probability of a V-shaped recovery in global growth.

Expected Ranges

USD/CAD: 1.3855 - 1.3975 ▼

EUR/CAD: 1.5000 - 1.5236 ▼

GBP/CAD: 1.7080 - 1.7437 ▼

AUD/CAD: 0.9059 - 0.9150 ▲

NZD/CAD: 0.8469 - 0.8556 ▲

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